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Ten Trends that

Will Aect the
Future of Mobile
Marketing
July 2011
7 billion people live on our planet.
5.2 billion of them use mobile
phones. Its not surprising that
these phones are fast becoming
one of the most popular channels
for marketers to reach consumers.
In this white paper, Michael
Levinsohn, Founder, President
and CEO of Lenco Mobile Inc.,
identies and discusses ten trends
that will aect how brand owners
use mobile phones to engage and
interact with their customers.
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1. More and more advertising
dollars will be allocated to mobile
Brand owners are beginning to consider
mobile as a more serious marketing
channel. They have significantly
increased the advertising dollars spent
on this channel. According to technology
research company Gartner, the amount
spent on mobile advertising in the United
States in 2011 will be $701.7 million,
growing to $5.79 billion in 2015.
The approach has shifted from the wait
and see of previous years to we have
to have a mobile strategy.
The rationale behind this is simple
mobile is measurable, something that
traditional above the line media has
not been able to demonstrate to big
spending brand owners.
Mobile also oers additional advantages
over traditional media, such as the
ability to
- test a campalgn very cheaply.
- dellver an approprlate offer to
a potential customer, when and
where it has the highest chance of
converting.
- concelve, deslgn and execute a
campaign in hours if need be, as
opposed to days, weeks or longer
for other media channels.
Wireless carriers have been inuential
in driving the enormous growth of the
mobile phone industry, by becoming
major advertisers across all media
sectors. According to Advertising
Age magazine, AT&T
TM
and Verizon
Communications spent $5.4 billion
advertising across all media categories
in 2010. Carriers recognize the value of
this investment. It brings in subscriber
revenue. Reducing customer churn
- the number of subscribers they
lose to another carrier - is a key
initiative for each one of them: they
will invest more advertising dollars in
retaining subscribers.
2. Brand owners will start using rich
media such as MMS messaging and
mobile apps to communicate with
their customers
Mobile phones have evolved as a
marketing channel since the early,
el ementar y appl l catl on of text
messaging. At rst it was used to notify
customers about retail oers. Then it
expanded to lnclude notlflcatlon of
transactions such as a message from
a bank that a credit card payment had
taken place at a retailer. In spite of the
simplicity of the medium, the messages
were highly eective because they were
immediate. In 2010 mobile subscribers
worldwlde sent approxlmately seven
trllllon text messages. Accordlng to
Portio Research Ltd. this generated
$179.2 billion in messaging revenue.
This is forecast to reach $334.7 by 2015.
Over the next few years, brand owners
will start using rich media to deliver
better quality messages to their
customers; we will see an increase in
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the use of MMS messages to deliver
marketing oers. The increase in the
volume of MMS messages will also be
aided by the fact that wireless carriers
have recently increased the permitted
size of MMS messages from 100kb-
300kb up to 500kb and sometimes
even 2MB. This will enable advertisers
to send more innovative messages to
consumers.
There are several reasons for the move
towards MMS messaging.
Outside of the United States, there
is already a significant market for
MMS messages on an Application-
to-Person (A2P) basis. This is a single
message sent to many subscribers.
It differs from a Person-to-Person
(P2P) message which is a unique
message sent from one individual
to another.
Imagine you are a brand owner who
wants to introduce a new motor
vehicle.
- ou create an MMS message and
send it to a targeted, opted in
base with a call to action asking
recipients to click on a link which
is in the MMS message.
- The subscrlber cllcks on the
embedded URL, and receives a
link to a mobi site.
- The mobl slte streams a four-mlnute
video to the subscriber.
- At the end of the vldeo, the
subscriber is oered a voucher or
coupon.
- The subscrlber downloads the
voucher and redeems it for a test
drive in the new vehicle at the
nearest dealership.
This process has huge benefits for
the advertiser.
- 8ased on cost per lead, lt ls a very
ecient marketing process.
- The quallty of the MMS messages
will be world class, because
messages will be delivered in
high resolution video format with
high quality images, creating a
positive impression of the brands
being promoted.
Time sensitive oers can now be made
to mobile subscribers using Location
Based Services. If the offer is not
redeemed within a pre-dened time
perlod, lt explres. 8ecause technology
has become more efficient, brand
owners will start using rich media,
delivered via mobile phones to engage
wlth thelr customers. we can expect
to see significant use of rich media
messages on mobile phones in the
months ahead.
Another factor aecting the growth
of rich media message usage is the
speed at which data can be delivered to
mobile phones. Data can be delivered
at speeds of up to 100 Megabits Per
Second (Mbps) on a fully deployed
and stable Long Term Evolution (LTE)
wireless network. At theses rates, it will
take less than ve minutes to download
a full length DVD to a mobile phone.
Initially, carriers in the United States
expect thelr LTL networks to run at
around 2-5 Mbps uplink and 5-12 Mbps
downlink time. While this is slower than
the eventual capacity, higher speed
networks will enable video streaming
and the delivery of larger, rich media
les to mobile phones.
Two questions that always arise around
MMS messaging are the perceived cost
and the ability of mobile phones in
the United States to receive an MMS
message.
Cost is an issue because subscribers pay
for incoming calls and data usage. This
will change. In future, when a brand
sends an MMS message to a customer
via their mobile phone, the carrier will
bill the brand not the subscriber. On a
cost per message basis, MMS messages
are proving to be very cost eective
because the conversion rate for high
quality MMS messages is far better than
for SMS text messages.
It is a mistake to assume that instant
messaging solutions will outperform
MMS messaging as a marketing channel.
Smart phone penetration in the United
States makes up approxlmately 30% of
the active subscriber base. That means
that about 70% of moblle phones ln
the United States are feature phones.
Feature phones lack the functionality of
smart phones: they cannot download
and run apps in the same way - but they
can receive an MMS message. A well-
prepared mobile campaign will cater
for all makes, models and operating
systems so that the customer experlence
ls seamless and excellent ln every respect.
As far as apps are concerned, there is
no question that they have a role to
play in mobile marketing, especially
when integrated into social media. But
the biggest limitation with apps right
now is that brand owners have to invest
heavily in letting their customers know
they have an app.. This requires a careful
cost-benet calculation. Since less than
two percent of all mobile subscribers
are actively using apps, marketers still
have to use other means of mobile
messaging to reach their customers.
3. Wireless carriers will invest
heavily in technology that enables
them to deliver rich media
services to their subscribers
Wireless carriers around the world are
facing very similar challenges: minutes
of usage the time that we spend
talking on our phones is going up,
but the revenue per minute of time
spent talking, is declining, in some areas
faster than others.
In developing markets, where around
73% of moblle subscrlbers are found,
the average monthly bill in many cases is
less than $10 per subscriber, per month.
As a result, carriers are looking for ways
to increase their Average Revenue Per
User (ARPU). The way to do this is to
oer interactive, rich media products
and services.
The challenge in developing markets is
the lack of mobile internet infrastructure
to deliver rich content to mobile devices.
Rich media technology platforms are
expenslve to lnstall. Carrlers wlll only
invest the capital when there is a valid
business case for doing so.
In more developed markets, such as the
United States, where the ARPU is closer
to $50 per month, and where smart
phone penetration is much higher,
carriers can justify the investment in
new generation delivery platforms such
as Long Term Evolution (LTE).
4. Consumers will start opting in
to oers from brand owners
The mobile phone has changed forever
the ways brand owners engage with
consumers. However, the single biggest
challenge facing brand owners revolves
around permission-based marketing.
Governments around the world are
enacting legislation that specically sets
out the basis on which brand owners can
engage with consumers and use their
data. Since mobile phones are seen as
far more personal than email, the level
of scrutiny surrounding mobile access
will be far higher.
The technology exlsts to run all sorts
of interesting mobile advertising
campaigns, but what is lacking in the
United States right now are databases of
opted in mobile subscribers who have
agreed to receive advertising oers via
their mobile phones.
Mobile subscribers will accept oers
about products and services that are of
interest to them. The key to building a
database of customers who are willing
to provide their personal information
will be to ensure that the offers are
relevant.
Subscrlbers also expect offers to
be del i vered when and where
they need them. This is one of the
major advantages of mobile as a
marketing channel.
One note of caution about marketing
to opted in databases. It is critical to
check suppression les before targeting
a database. This will ensure that brand
owners are not targeting subscribers
who have chosen not to receive oers
via their mobile phones. Failing to do
so will carry signicant penalties.
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5. Penalties for spam messaging
will be severe
The dierence between online spam
and mobile spam can be described as
follows. While we do not want junk mail
dropped lnto our mallboxes at home,
at least we can choose to throw it away.
But when the mailman walks through
our front door, into our lounge and
starts opening the mail and reading
it to us, that is unacceptable. Firstly,
he is trespassing and secondly, we do
not want him deciding what mail we
should read.
Online spam is the equivalent of the
unk mall ln our mallboxes. The mallman
in our lounge or on our mobile phones
is mobile spam.
Online it is very dicult to police the
enormous volume of unsolicited
messages that are delivered each
day. Tracking an IP address and then
ldentlfylng exactly who breached
the law is an almost insurmountable
task. The internet is a multi-national
communications network that is open
to use and abuse by all and sundry.
The mobile world is dierent.
Wireless carriers are the custodians
tasked with policing access to their
networks. The penalties for not enforcing
the regulations will be high. As a result,
wlreless carrlers wlll expend tlme and
eort on ensuring that access via their
networks is not abused.
Value Added Service providers, who
wish to sell products and services
via mobile devices, will adhere
to stringent checks and balances
and their offers will be vetted well
in advance.
6. Data and analytics will be
the key drivers behind mobile
marketing
Mobile marketing generates signicant
quantities of data: analytics tools to
understand the data and to improve
the quality of the oers we receive, will
become key components of a mobile
marketing strategy.
Analysis can provide data about when
and where an oer was taken up; the
redemption of that oer can be tracked
across multiple channels. This is a vast
improvement over traditional broadcast
media where oers are made to large,
loosely targeted audiences based on
sometimes questionable demographics.
Mobile oers the ability to develop
highly personalized marketing oers for
individual customers based on their past
purchasing behavior. The more data
that is generated and evaluated, the
more rened those oers will become.
Brand owners can use sophisticated
data and analytics tools to carry out
predictive behavior modeling, which is
the art of determining in advance how
a customer will behave given a set of
dened variables.
Por example, lf a motor vehlcle lease ls
about to explre, then the chances are
better that an oner to extend wlll be
taken up closer to the date of explratlon,
than further from the date of explratlon.
Based on their analysis, brand owners
can develop increasingly personalized
oers for their mobile subscribers. The
major assumption underpinning the
importance of data and analytics in the
mobile world is that it costs far more to
acquire new customers than it does to
retaln exlstlng customers. Dependlng
on the industry, it can cost between
four and five times more to secure
new customers than it would to retain
customers who are already loyal t o
a brand.
The biggest users of the data and
analytics tools in the mobile world will
be the wireless carriers themselves.
The monthly churn rates for the top
ten carriers in the United States vary
between l.3% and 3.5%. Carrlers
will add tens of millions of dollars to
their protability when they improve
retention levels. By using predictive
behavior modeling and developing
eective campaigns, carriers will soon
start improving the conversion rates of
campaigns delivered via mobile phones.
7. Brand owners will look to one
specialist service provider for
guidance and advice in the
mobile space
Mobile marketing introduces a layer of
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complexlty that has long slnce been
overcome in the online world. Besides
the obvious challenge of not having a
database of opted in mobile subscribers,
brand owners are faced with technical
complexlty as well.
Historically, mobile marketing the
Unlted States has been llmlted to text
message campaigns and apps delivered
to smart phones. In the near future,
rich media messages will be delivered
to mobile phones via wireless carriers
and via the internet. They will be in the
form of high quality, engaging video
messages.
The process required to create and
dellver these messages ls complex and
requires interaction with a number of
players, from advertising agencies, to
digital marketing companies, mobile
aggregators and the wireless carriers
themselves.
To make it more complicated, prior to
sending a message via the wireless
carriers network, the brand owner will
have to submit the message to the carrier
for approval, a process that currently
takes up to eight weeks. This is an
anomaly in an otherwise highly ecient
market place. Over time this process will
be streamlined.
Brand owners who wish to reach mobile
subscribers are already looking for a
single, trusted service provider, who can
navlgate the complexltles of creatlng
and delivering mobile messages.
why all thls complexltyI The answer
lies in the vast array of mobile phone
operating systems and dierent screen
sizes. Rich media messages delivered
to mobile phones will for the most part
have to be customized. The one size
ts all approach will not work. A video
message created for one handset will not
necessarily work for another. In order to
ensure that the user experlence remalns
superb, messages have to be created and
delivered across multiple handsets and
multiple operating systems.
The most ecient and knowledgeable
mobile marketing service providers
will win.
8. Advertising agencies will be
under pressure to present a
cohesive mobile strategy which
can be measured by their clients
The famous statement Half the money
I spend on advertising is wasted; the
trouble is I dont know which half, is
attributed to John Wanamaker in the
1800s and reects the uncertain results
of traditional marketing. Advertising via
mobile phones changes that statement.
Now brand owners can determine an
accurate Return On Investment (ROI)
for each dollar spent on a mobile
advertising campaign. And, because
it is now possible to measure results
precisely, brand owners will put
pressure on advertising agencies to
deliver acceptable returns and to
provide substantiated information
about mobile advertising campaigns.
This will ultimately lead to performance
mar ket i ng campai gns wher e
advertising agencies are paid a fee
for xed costs and a further fee based
on performance. This thinking is not
new and comes from the world of CPA
or Cost Per Acquisition marketing on
the internet. Previously it was just not
possible to implement these ideas until
sophisticated mobile devices made it
easy to track exact results.
9. Smaller businesses will start
to use the mobi l e channel
because it is cost effective and
gives them an advantage over
mul t i - nat i onal brands wi t h
deep pockets
Small retailers will become major users
of the mobile channel, simply because
it is more aordable and measurable
than any other channel.
The online concept of hyperlocal will
be further enhanced through the use
of mobile phones. For a relatively small
investment of a few thousand dollars,
a small business owner can build a
database of opted in customers and
test the success level of their oers.
Traditional media does not allow this
because it is a broadcast medium
designed to operate at scale and reach
large audiences.
The mobile channel is cost eective for
smaller businesses because:
- |t allows them to access customers on
a reglonal basls and extend targeted
oers to those customers.
- A moblle campalgn can be created
and sent in a few minutes, compared
to traditional media where the lead
time for a radio, print or television
commercial can run into weeks
or months.
- 8rand owners can dellver tlme
sensitive oers that can be adjusted
depending on the success of a
campaign. If they want to send
out an oer that is valid only for a
specic date and time, they can do
so. This is the most eective form
of marketing possible: reaching the
right customers, with an oer they
want to receive, at the time when
they want to receive it.
- 8rand owners can personallze an
oer in a very cost eective way. An
oer that is addressed to a customer
by name and is relevant will always
perform better than a generic oer
to an untargeted audience.
10. Mobile payment will become
mainstream
There are very few functions that we
cannot perform on our phones already.
The next frontler ls moblle payment.
Accordlng to Portlo Pesearch Ltd., 2.l%
of mobile subscribers used their mobile
phones for a payment application in
20l0. Thls ls expected to grow to 9.2%
by 2014.
But there is a lot of groundwork to be
laid before we can take our phones to
Walmart to pay for groceries.
Banks and the card issuing associations
have invested billions of dollars in
providing safe, secure payment solutions
for their customers. Together they have
a vested interest in ensuring an orderly
marketplace for both consumers and
retail merchants. They will play a central
role in defining the mobile payment
landscape. Besides the technical
component of processing mobile
payments, they need to address issues
such as risk management and money
laundering. Tracking payments in one
geographic region is complicated
enough; but tracking payments across
borders and in different currencies is
even more complex. |t wlll take tlme to
set it up.
Wireless carriers will have a signicant
say in the mobile payment industry,
because many of the payments are
going to be carried across their networks.
Many payments that are now made
using debit and credit cards will in time
be made using mobile phones and
other Personal Digital Assistants (PDAs).
A key consideration will be how to
integrate these mobile payments
lnto the exlstlng lnfrastructure used
by retailers today. In order for the
new mobile payment solutions to
operate eciently, they will have to
work seamlessly with point of sale
software, which in many cases also
runs the loyalty program application
for retailers. Mobile payment platforms
that co-exlst wlth polnt of sale software
and loyalty programs is the ultimate
goal for the payment industry and
will lead to the biggest benefits for
consumers. As with any technical
innovation, it will be challenging to
identify and then implement the most
appropriate solutions, but over time, this
will happen.
In the mobile payments industry, Near
Field Communications (NFC) will require
common standards between devices
and participants. A number of NFC
based payment solutions are being
tested, and in time the key role players
will also agree on these standards.
The mobile payment opportunity is
so big that eventually everybody will
agree on a business model that makes
sense, but there is still some way to go.
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About Lenco Mobile Inc.
Based in Califronia, Lenco Mobile Inc. is an award
winning mobile marketing company with oces in
Australia, South Africa, Singapore, Korea, Mexico,
Colombia and the United Kingdom. The company
provides mobile marketing services and solutions
to a wide range of multinational brands, including
several of the worlds leading wireless carriers.
Lenco Mobiles technical platforms enable wireless
carriers to improve the eciency of their messaging
infrastructure and reduce the total cost of ownership
through revenue share arrangements. Lenco Media
Inc., a wholly owned subsidiary of Lenco Mobile
Inc., has pioneered the delivery of online and
mobile in-stream advertising, using our proprietary
UniversalPlayer.
Copyright 2011
Lenco Mobile USA Inc.
All rights reserved.
For more information, please contact us at:
Address 345 Chapala Street
Santa Barbara,
California 93101
Phone 805.308.9199
Email michael.levinsohn@lencomobile.com
Website lencomobile.com
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